EQD Research

VIX returned to the low 20’s and the S&P 500 (SPX) gave up over 3% last week. The Nasdaq-100 (NDX) was down just a bit more than SPX, losing 3.59%. We expect an early signal around an economic recovery will be NDX outperformance versus SPX. There are small signs of this happening, but NDX performance is probably best described as being in line with SPX over the past few weeks.

Mike Tyson once said, “Everyone has a plan until they get punched in the mouth.” That statement sums up last week.

We are always supposed to take a pause when we hear the phrase “this time is different”, but that’s the best phrase to sum up a news heavy week that combined weak stock prices and a drop in volatility expectations.

Small cap stocks ruled the week last week with a 6.01% gain for the Russell 2000 (RUT), which turns out to be (surprisingly) the second strongest week for RUT in 2022.

The fourth quarter is only two weeks old and many market participants are already muttering about just getting the year over with. Last week the S&P 500 (SPX) and Russell 2000 (RUT) both lost about 1.5% while the Nadaq-100 (NDX) was down by over 3%.

Despite Friday’s sell off, equity indices were higher after the first week of the last quarter of 2022.

I was recently on a panel with some real smart folks talking volatility. One of the other panelists, Scott Nations, pointed out that while we were talking the October VOLQ future was at a premium to the spot index, while the October VIX future was at discount to spot VIX. Simply stated, VIX was in backwardation while VOLQ was in contango. I thought this was a bit surprising and assumed this was uncommon.

This past quarter was a tough one, there is no way to sugar coat it. In this space, we normally start out with a quick look at the previous week's market activity. However, we are going in a different direction today.

Two brutal weeks in a row is how one of my students referred to the past couple of weeks in the equity markets. This past week was worse than the previous one.

U.S. equities put up a September like week losing between 5.77% (Nasdaq 100 – NDX) and 4.53% (Russell 2000 – RUT) on the week.